Pages

Wednesday, 27 March 2013

"You're already a walking sensor platform… You
are aware of the fact that somebody can know where you are at all times because
you carry a mobile device, even if that mobile device is turned off. You
know this, I hope? Yes? Well, you should… Since
you can't connect dots you don't have, it drives us into a mode of, we
fundamentally try to collect everything and hang on to it forever… It is really
very nearly within our grasp to be able to compute
on all human generated information."

If God did not exist – people would invent one! The development of human civilization requires mechanisms
promoting cooperation and social order. One of these mechanisms is based on the
idea that everything we do is seen and judged by God – bad deeds will be
punished, while good ones will be rewarded. The Information Age has now fueled the dream that God-like omniscience
and omnipotence can be created by man.

For many decades, the processing power of computer chips has
increased exponentially – a process known as "Moore's Law". Storage
capacity is growing even faster. We are now entering a phase of the
"Internet of Things", where computer chips and measurement sensors
will soon be scattered everywhere producing huge amounts of data ("Big
Data"). It's not just cell phones, computers and factories that are more and
more connected, but our coffee machines, fridges, shoes and clothes, among
others.

Gold Rush for the 21st
Century Oil

This huge amount of data, including credit card transactions,
communication with friends and colleagues, mobility data and more is already
celebrated as the “Oil of the 21st Century”. The gold rush to exploit this
valuable resource is just starting. But the more data are generated, stored and
interpreted, the more will it be possible for companies and secret services to
know us better than our friends and families do. For example, the company
"Recorded Future" – apparently a joint initiative between Google and the
CIA – seems to investigate people’s social networks and mobility profiles.
Furthermore, credit card companies analyze "consumers’ genes" – the
factors that determine our consumer behavior.

Our individual motivations are analyzed in order to understand our
decisions and influence our behavior through personalized search,
individualized advertisements, and recommendations or decisions of our Facebook
friends. But how many of these “friends” are trustable, how many of them are
paid to influence us, and how many are software robots?

Humans Controlled by
Computers?

Today, computers autonomously perform the majority of financial
transactions. They decide how much we have to pay for our loans or insurances,
based on our behavioral data and on those of our friends, neighbors and
colleagues. People are increasingly discriminated by obscure "machine
learning" algorithms, which are neither transparent nor have to meet
particular quality standards. People classified as dangerous are now eliminated
by drones, without a chance to prove their innocence, while some countries are
discussing robots rights. Soon, Google will drive our cars. And in ten years,
supercomputers will exceed the performance of human brains.

Is Privacy Still Needed?

What will the role of privacy be in such an information society? Some
companies are already trying to turn privacy into a marketable commodity. This
is done by first taking away our privacy and then selling it back to us. The
company Acxiom, for example, is said to sell detailed data about more than 500
million people. Would it be possible to know beforehand whether the data will be
used for good or bad? Many will pay to have their personal data removed from
the Internet and commercial databases. And where data removal is not possible,
fake identities and mobility profiles will be offered for sale, to obfuscate
our traces.

Information Overload

“Big Data” do not necessarily mean that we'll see the world more
accurately. Rather, we will have to pay for “digital eyewear” that allows us to
keep an overview in the data deluge. Those not willing to pay (possibly also
with personal data) will be blinded by an information overload. Already today,
we cannot assess the quality of the answers we get online. As the way in which
the underlying data are processed remains hidden to the user, it is hard to know
how much we are being manipulated by web services and social media. But given the huge economic potential, it is
pretty clear that manipulation is happening.

The Knowledge-Is-Power
Society

The statement "knowledge is power" seems to imply that
"omniscience is omnipotence" – a tempting idea indeed. Therefore, who
collects all the data in the world, such as the National Security Agency (NSA)
in the United States, might hope to become almighty, especially if equipped
with suitable manipulation tools. By knowing everything about us, one can always
find an Achille’s heel. Even CIA director General David Petraeus was not immune
to this risk. He became the victim of a love affair irrelevant to his duty.

The developments outlined above are not fantasy - they are already
taking place behind the scenes or are just around the corner. Yet, our society
and legal system are not well prepared for this.

Each 1 dollar bill may
be read to suggest that omniscience and omnipotence (see the “God’s eye”) and
the belief in God (“In God We Trust”) should be the basis of a new world order
(“Novus Ordo Seclorum”). Source: Wikimedia Common, see

Some people may see information and technologies as new tools to
create social order. Why should one object to a computer or government or
company taking decisions for us, as long as they are in our interest? But who
would decide how to use these tools? Can the concept of a ‘caring state’ or a ‘benevolent
dictator’ really work? In other words, can supercomputers enabled by Big Data
take the decisions that are best for us?

This has always failed in the past, and it will be also
unsuccessful in the future. Not only do many systems fail under asymmetric
information (if some stakeholders are very well informed and others very badly).
The performance of all computers in the world will also never be sufficient to
optimize our economy and society in real time. Supercomputers cannot even
optimize the traffic lights of a big city in real time. This is because the
computational effort explodes with the size and complexity of the system. Just
a very simple society could be optimized top down, but who would want to live
in it?

Privacy and Socio-Diversity
Need Protection

The aforementioned "omniscient almighty society" cannot
work. If we all did what a super-intelligent institution thinks is right – it
would be as if children always did what parents are asking for, never becoming
adolescents. Then they would never take autonomous decisions, and find their
own way. Privacy is a necessary ingredient for the development of individual responsibility
and for society. It should not to be understood as a concession to the
citizens.

“Private” and “public” are two sides of the same coin, each of which
cannot exist without the other. People can only adjust to the thousands of normative
public expectations every day, if there is a private, protected space where
they can be free and relax. Privacy is an invention that reduces mutual
interference to a degree that allows us to "live and let live". If we
knew what others think, we would have far more conflicts.

The importance of unobserved opinion formation is demonstrated by
the crucial role of anonymous votes in democracies. Would we only adjust ourselves
to expectations of others, many new ideas would not emerge or spread. Social
diversity would decrease, and thus the ability of our society to adapt.
Innovation requires the protection of minorities and new ideas. It is an engine
of our economy. Social diversity also promotes happiness, social well-being, and
the ability of our society to recover from shocks ("resilience").

Social diversity must be protected just as much as biodiversity.
Today, however, the Internet recommends us opinions about books, music, movies
and even about friends and partners. This undermines the principle of the
"wisdom of crowds" and collective intelligence. Why should a company
decide what is good for us? Why can’t we determine the recommendation
algorithms ourselves? Why don’t we get access to relevant data?

An Alternative Vision of
the Information Age

Also in an increasingly unstable world, surveillance, combined
with the manipulation or suppression of undesired behaviors, is not a
sustainable solution. But is there an alternative to the omniscient almighty
state that matches our ethical values? An alternative that can create cultural
and economic prosperity? Yes, indeed!

Our society and economy are currently undergoing a fundamental
transformation. Global networking creates increasing complexity and instability
that cannot be properly managed by planning, optimization and top-down control.
A flexible adaptation to local needs works better for complex, variable systems.
This means that managing complexity requires a stronger bottom-up component.

In the economy and the organization of the Internet, decentralized
self-organization principles have always played a big role. Now they have also
spread to intelligent energy networks ("smart grids") and traffic
control. One day, societal decision-making and economic production processes
will also be run in a more participatory way to better manage the increase in complexity.
It seems the natural course of history. A growing desire of citizens to
participate in social, political and economic affairs is already found in many parts
of the world.

The Democratic,
Participatory Market Society

In connection with a participatory economy, one often speaks of
“prosumers”, i.e. co-producing consumers. Advanced collaboration platforms will
allow anyone to set up projects with others to create their own products, for
example with 3D printers. Thus, classical companies and political parties and
institutions might increasingly be replaced by project-based initiatives – a
form of organization that I would like to call “democratic, participatory
market society”.

To ensure that the participatory market society will work well and
create jobs on a large scale, the right decisions will have to be taken. For
example, it seems essential that the information systems of the future will be
open, transparent and participatory. This requires us to create a participatory
information and innovation ecosystem, i.e. to make large amounts of data accessible
to everyone.

The Benefit of Opening Data
to All

The great advantage of information is that it is (re)producible in
a cheap and almost unlimited way, so that the eternal struggle for limited
resources might be overcome. It is important that we take advantage of this and
open the door to an age of creativity rather than limiting access to
information, thereby creating artificial scarcity again. Today, many companies
collect data, but lack access to other important data. The situation is as if
everyone owned a few words of our language, but had to pay for the use of all the
other words. It is pretty clear that, under such conditions, we could not fully
capitalize on our communicative potentials.

To overcome this dissatisfactory data exchange situation and achieve
"digital literacy", one could decide to open up data for all.
Remember that most countries have also decided to turn the privilege of reading
and writing into a public good by establishing public schools. It is well known
that this step has boosted the development of modern societies. Similarly, "Open
Data" could boost the development of the information society, but the
producers of data must be adequately compensated.

A New Paradigm to Manage Complexity

Access to data is essential for the successful management of
complex dynamical systems, as it requires three elements: (i) proper systems design to support predictability
and controllability, (ii) probabilistic short-term forecasts of the system
dynamics, which need plenty of reliable real-time data, and (iii) suitable adaptive
mechanisms ("feedback loops") that support the desired system
behavior.

Managing complexity should build on the natural tendency of
complex dynamical systems to self-organize. To enable self-organization, it is
crucial to find the right institutional settings and suitable ‘rules of the
game”, while avoiding too much top down control. Then, complex systems can
essentially regulate themselves.

One must be aware, however, that complex systems often behave in
counterintuitive ways. Hence, it is easy to choose the wrong rules, thereby ending
up with suboptimal results, unwanted side effects, or unstable system behaviors
that can lead to man-made disasters. The financial system, which went out of
control, might serve as a warning. These problems have traditionally been
managed by top-down regulation, which is usually inefficient and expensive.

Loss of Control due to a Wrong
Way of Thinking

Whether a system can be adequately managed or is self-organizing
in the way we want is a matter of systems design. If the system is designed in
the wrong way, then it will get out of control sooner or later, even if all
actors involved are highly trained, well equipped and highly motivated to do
the right things. “Phantom traffic jams” and crowd disasters are examples of unwanted
situations that occur despite all efforts to prevent them from happening. Likewise,
financial crises, conflicts and wars can be unintended consequences of systemic
instabilities. Even today, we are still not immune to them.

Therefore, we need a much better understanding of our
techno-socio-economic-ecological systems and their interdependencies. Appropriate
institutions and rules for our highly networked world must still be found. The
information age will revolutionize our economy and society in a dramatic way.
If we do not pay sufficient attention to these developments, we will suffer the
fate of a car driving too fast on a foggy day.

Decisions Needed to Use
Opportunities and Avoid Risks

To meet the challenges of the 21st century and benefit from its
great opportunities, a Global Systems Science needs to be established in order to
fill the current knowledge gaps. It aims to generate new insights allowing politics,
economy and society to take better informed, more successful decisions. This
could help us to use the chances of the information age and minimize its risks.
We must be aware that everything is possible – ranging from a Big Brother
society to a participatory economy and society. The choice is ours!

About the author

Dirk Helbing is Professor of Sociology,
in particular of Modeling and Simulation at ETH Zurich, and member of its
Computer Science Department. He earned a PhD in physics and was Managing
Director of the Institute of Transport & Economics at Dresden University of
Technology in Germany. He is internationally known for his work on pedestrian
crowds, vehicle traffic, and agent-based models of social systems. Furthermore,
he is coordinating the FuturICT Initiative (http://www.futurict.eu), which focuses on the
understanding of techno-socio-economic systems, using Big Data. His work is
documented by hundreds of scientific articles, dozens of keynote talks, and
media reports in all major languages. Helbing is elected member of the World
Economic Forum’s Global Agenda Council on Complex Systems and of the German
Academy of Sciences “Leopoldina”. He is also chairman of the Physics of
Socio-Economic Systems Division of the German Physical Society and co-founder
of ETH Zurich’s Risk Center.

Tuesday, 19 March 2013

“True capitalists are other-regarding” – “Perhaps we have applied
the wrong theory, and our economy should be run by different people”

The body of economic literature will have to change, implies a
groundbreaking discovery. In their computer simulations of human evolution,
scientists at ETH Zurich find the emergence of the “homo socialis” with “other-regarding”
preferences. The results explain some intriguing findings in experimental economics
and call for a new economic theory of “networked minds”.

Economics has a beautiful body of
theory. But does it describe real markets? Doubts have come up not only in the
wake of the financial crisis, since financial crashes should not occur
according to the then established theories. Since ages, economic theory is
based on concepts such as efficient markets and the “homo economicus”, i.e. the
assumption of competitively optimizing individuals and firms. It was believed
that any behavior deviating from this would create disadvantages and, hence, be
eliminated by natural selection. But experimental evidence from behavioral
economics show that, on average, people behave more fairness-oriented and
other-regarding than expected. A new theory by scientists from ETH Zurich now explains
why.

“We have simulated interactions of
individuals facing social dilemma situations, where it would be favorable for
everyone to cooperate, but non-cooperative behavior is tempting,” explains Dr. Thomas
Grund, one of the authors of the study. “Hence, cooperation tends to erode, which
is bad for everyone.” This may create tragedies of the commons such as
over-fishing, environmental pollution, or tax evasion.

Evolution of “friendliness”

Prof. Helbing of ETH Zurich, who
coordinated the study, adds: “Compared to conventional models for the evolution
of social cooperation, we have distinguished between the actual behavior –
cooperation or not – and an inherited character trait, describing the degree of
other-regarding preferences, which we call the friendliness.” The actual
behavior considers not only the own advantage (“payoff”), but also gives a weight
to the payoff of the interaction partners depending on the individual
friendliness. For the “homo economicus”, the weight is zero. The friendliness spreads
from one generation to the next according to natural selection. This is merely
based on the own payoff, but mutations happen.

For most parameter combinations,
the model predicts the evolution of a payoff-maximizing “homo economicus” with
selfish preferences, as assumed by a great share of the economic literature.
Very surprisingly, however, biological selection may create a “homo socialis”
with other-regarding preferences, namely if offsprings tend to stay close to
their parents. In such a case, clusters of friendly people, who are
“conditionally cooperative”, may evolve over time. That is, they prefer to be
cooperative, but they do not cooperate, as long as the interaction partners in
the neighborhood are non-cooperative. In this way, they can protect themselves
from being exploited. “But if by chance an unconditionally cooperative
individual is born in the neighborhood one day, someone like ‘Mother Theresa’, the
conditional cooperators may turn to cooperative behavior”, explains Christian
Waloszek, one of the coauthors of this study. As a consequence, cooperation may
spread in a cascade-like way and earn higher paysoffs, such that many friendly
offspring are born. The “homo socialis” is established and begins to outnumber
the selfishly optimizing “homo economicus”.

Trespassing the “valley of tears”

“But it does not always go so
well,” Christian Waloszek continues. “A superfriendly, unconditionally
cooperative individual may be exploited by everyone, consequently getting a
miserable payoff and no offspring. Hence, such people might die without an
impact on the world.” That means, the evolution from the “homo economicus” to
the “homo socialis” may go through a valley of tears. “Without random mutations
it would never happen,” adds Helbing. However, if enough conditionally
cooperative individuals are already around, the “homo socialis” spreads.

“This has fundamental implications
for the way, economic theories should look like,” underlines Professor Helbing.
Most of today’s economic knowledge is for the “homo economicus”, but people
wonder whether that theory really applies. A comparable body of work for the
“homo socialis” still needs to be written. Our economic thinking may have been totally
misled. It may apply to the “untamed selfish beast” that characterized Thomas
Hobbes picture of humans, when he called for the ordering hand of a state in
his book “Leviathan” back in 1651. But since then, much has changed.

Networked minds create a cooperative species

For example, Nobel Prize winner
Elinor Ostrom has shown that people can manage their resources in a cooperative
way, if following certain rules. This is found in Swiss communities as well as
collaborative projects in the Web2.0. Wikipedia is probably the best-known
example. “Now, we have laid the foundation of a new theory of human decision
making,” says Helbing. “Thanks to its evolutionary foundation, we just have to
make very few, widely accepted assumptions.” This sets the model apart from many
alternative choice models. The long overdue unification of the behavioral
sciences might be just around the corner.

“People in our model do not behave
irrationally,” explains Grund, but while the “homo economicus” optimizes its utility
independently, the “homo socialis” puts himself or herself into the shoes of
others to consider their interests as well.” Helbing adds: “This establishes
something like “networked minds”. Everyone’s decisions depend on the
preferences of others.” This becomes even more important in our networked
world.

A participatory kind of economy

How will this change our economy?
Today, many customers doubt that they get the best service by people who are
driven by their own profits and bonuses. “Our theory predicts that the level of
other-regarding preferences is distributed broadly, from selfish to altruistic.
Academic education in economics has largely promoted the selfish type. Perhaps,
our economic thinking needs to fundamentally change, and our economy should be
run by different kinds of people,” suggests Grund. “The true capitalist has
other-regarding preferences,” adds Helbing, “as the “homo socialis” earns much
more payoff.” This is, because the “homo socialis” manages to overcome the
downwards spiral that tends to drive the “homo economicus” towards tragedies of
the commons. The breakdown of trust and cooperation in the financial markets
back in 2008 might be seen as good example.

“Social media will promote a new
kind of participatory economy, in which competition goes hand in hand with
cooperation,” believes Helbing. Indeed, the digital economy’s paradigm of the
“prosumer” states that the Internet, social platforms, 3D printers and other
developments will enable the co-producing consumer. “It will be hard to tell
who is consumer and who is producer”, says Christian Waloszek. “You might be
both at the same time, and this creates a much more cooperative perspective.”

Figure caption: Local reproduction is crucial for
the transition from a “homo economicus” to a “homo socialis”. The rate v of
local reproduction determines the probability of an offspring to occupy the
closest empty site to the parent. With probability (1-v), the offspring moves
to an empty site that is randomly selected. The circle size indicates average
friendliness, while the circle color represents the share of cooperators. The
parameter T characterizes the level of temptation to behave non-cooperatively
in the social dilemma situations the people find themselves in.

Figure caption: Evolution of the distribution of
friendliness in the course of time. It is clearly visible that a broad
distribution of individual utility functions results, even though everybody
starts off with a purely self-regarding behavior, for which the utility
function agrees exactly with the payoff function.

FuturICT Hubs

Followers

FET Flagship Initiative

The activities leading to these results has received funding from the European Union Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 284709 - project 'FuturICT', a Coordination and Support Action in the Information and Communication Technologies activity area